- Chinese Premier Li Qiang spurred market expectations for more stimulus in a speech.
- China's services activity and business confidence rose in October, boosting market sentiment.
China is playing up its economy as the US heads to the polls in a closely watched presidential election.
On Tuesday, Chinese Premier Li Qiang touted his country's economy, saying he's confident of hitting its GDP growth target of around 5% this year, according to state media.
He also drummed up market expectations for more economic stimulus, saying Beijing has "ample space for fiscal policy and monetary policy."
Li's remarks came just as the Purchasing Managers' Index survey from Caixin and S&P Global showed October services activity in China expanded at its fastest pace in three months. Business confidence also rose to the highest level since May, the private-sector survey showed.
Wang Zhe, a senior economist at Caixin Insight Group, said China's aggressive stimulus in late September has improved sentiment.
"The Caixin manufacturing and services PMI surveys showed that market demand stabilized and optimism improved, early signs of the new policies' impact," Wang said.
Deutsche Bank analysts wrote in a note that Li's comments highlight China's "significant policy flexibility." China's services PMI survey results on Tuesday also boosted risk sentiment in the world's second-largest economy, they added.
China's benchmark CSI 300 Index closed 2.5% higher, while Hong Kong's Hang Seng Index closed 2.1% higher.
Beijing is watching the US presidential election
Amid Li's show of confidence, Beijing is watching the US presidential election closely to determine its next course of action.
China's Standing Committee of National People's Congress — its top legislative body — is meeting through Friday and is expected to announce fresh fiscal stimulus to prop up its economy, which has been mired in a prolonged economic downturn amid an epic property crisis.
"Whispers are that Beijing may have to augment the size and details of the fiscal stimulus depending on whether it is a Harris or Trump Presidency," Vishnu Varathan, Mizuho Bank's chief economist of Asia excluding Japan, wrote in a note on Friday.
China's legislative body would be considering a plan to raise $1.4 trillion in extra debt over the next few years to fund a part of an economic rescue package, Reuters reported on Tuesday, citing two sources with knowledge of the matter.
Beijing is likely to roll out a bigger stimulus to buffer market volatility if Republican candidate Donald Trump wins, Varathan wrote.